I owe $79k on a 2-unit apt house that might bring $60-70k. 401k (around $10k). Considering Deed in lieu, but wondering about consequences.

Asked by Goinbroke, Waterville, ME Thu Oct 21, 2010

Wife and I are buying a second house due to job change for her (she was driving 120 miles a day for the last year). We currently live in the 2-unit apt building i bought. We've been trying to sell since Aug 1st, and trying to rent it out since July 1st with no hits. We've nearly drained our savings to keep the apt. home afloat, but do not want to sacrifice our new home and her job to keep the place if it's not worth it. How do I pursue options like renegotiating the mortgage, deed in lieu, or other options that will be a better option than foreclosure?

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Tim McClary’s answer
Tim McClary, Agent, Bangor, ME
Wed Feb 8, 2012
If your tenant is able to do it, you may offer them the home. If they were able to afford your mortgage on it you may be able to owner finance it to them until they can afford their own mortgage.
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Bob Movin-On, , Hartford, CT
Thu Oct 21, 2010
Deed-in-lieu-of is your best option after trying to avoid foreclosure with a loan modification, yes deed-in-lieu-of and short sale are forms of foreclosure so be a where.
Deed-in-lieu-of allows you to negotiate what will happen with that deficiency, oh and by the way that $79K is or will be a lot more before you are done, missed payments, late fees, attorneys fees, you name it the bank will find it.

Good Luck
Bob Patrick
Buy a home after foreclosure, short sale, deed-in-lieu-of or bankruptcy expert
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Mh Solutions…, , 04103
Thu Oct 21, 2010
It's a tough spot, and unfortunately many of our clients have the exact same dilemma. Lenders do offer alternatives but most of these are available when borrowers fall behind on their payments. Counterproductive as it may seem, this is generally the case. One thing you could try is to negotiate with your lender for reduced monthly payments. This is a normally time consuming and frustrating, unless you have your mortgage with a local lender. The large national lenders are so overburdened these days that communicating with them is often very challenging. They will likely ask for your personal financials in determining whether this is an option, and may not even consider it at all when current on your monthly payments. Be very careful when considering Deed-in-Lieu. This affects your credit rating the same way a foreclosure does. In fact, Deed-in-lieu can be categorized as voluntary foreclosure. Lenders still need to approve Deed-in-Lieu transactions, and we have seen instances where the lender refused to take the property back. One has to remember that lenders are in the business of lending on property, not owning them. Bank of America, for example, really doesn’t want to own your property in Waterville Maine this winter. Most lenders will consider a short sale however, but normally only will consider this alternative when the monthly mortgage payments fall in arrears. A short sale is when the lender accepts less than what is owed from the sale of the property, or in other words, they approve a sale that is “short” what is owed. Do keep in mind that these alternatives may have a negative affect on your credit rating. A short sale doesn’t affect a person’s credit score nearly as bad as a bankruptcy or foreclosure, but it does nevertheless.
Web Reference:  http://www.mhsolutionsme.com
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